Bankers Life and Casualty Company*fn1 commenced a state court action against Bellanca Corporation*fn2 seeking declaratory judgment as to the ownership of 500,000 shares of common stock of Automatic Washer Company.*fn3 Bellanca answered and filed a counterclaim which, as amended, seeks recovery of $4,000,000.00 from Bankers for 500,000 shares of Automatic it delivered to Bankers. After amendments in the pleadings the case was removed to the District Court on grounds of diversity. Motions for summary judgment and judgment on the pleadings were denied Counts I to IV inclusive of its counterclaim; and the cause proceeded to trial without a jury on the amended counterclaim (Counts V and VI) and the amended answer thereto.

The District Court after entering findings of fact, conclusions of law, and filing a written opinion granted judgment for Bellanca on Count VI of the counterclaim in the amount of,1,250.000.00 plus interest from August 8, 1956 at 5% per annum. Both parties appealed.

Under date of May 8, 1956 Bankers and Bellanca entered into an agreement reciting Bankers' desire to purchase from Bellanca 1,112,500 shares of common stock of Automatic and Bellanca's agreement to deliver or cause Automatic to deliver an additional amount so that Bankers will own not less than 51% of the issued and outstanding shares of Automatic. In the agreement Bellanca represents it has good title to the 1,112,500 shares of Automatic and authority to sell them and to deliver or cause Automatic to deliver additional shares so that Bankers shall own at least 51% of the issued and outstanding shares of Automatic. The agreement states that Bellanca "hereby sells" and Bankers "hereby purchases" 1,112,500 shares of the common stock of Automatic for a total purchase price of $8,900,000.00 or $8.00 per share and provides that delivery by Bellanca to Bankers shall be made as follows:

"(i) 500,000 shares shall be delivered on execution of this agreement and

"(ii) 612,500 shares shall be delivered on or before such date as shall be ninety (90) days after the date of this agreement."

The contract provides that Bankers shall make payment of the purchase price by making transfers to Bellanca of stocks in four corporations which were owned by Bankers, the stocks being valued for that purpose at stated amounts. Bankers committed itself to make loans aggregating approximately $5,000,000.00 on the properties owned by the corporations whose stock was to constitute the purchase price. Any additional shares of Automatic needed to make up the 51% stock interest were to be delivered within the ninety day period at $6.75 per share.

Upon execution of the agreement Bellanca delivered the 500,000 shares of Automatic to Bankers. No further deliveries were made and upon expiration of the ninety-day period Bankers notified Bellanca by letter under date of August 8, 1956 that:

The defense by Bankers to Bellanca's counterclaim for recovery for the 500,000 shares it delivered and Bankers elected to retain is grounded on Bankers' assertion that the contract of sale and Bellanca's conduct with respect thereto violated Section 16(c) of the Securities and Exchange Act, 15 U.S.C.A. § 78p(a) and (c),*fn4 and consequently by reason of the provisions of Section 29(b) of the Act, 15 U.S.C.A. § 78cc(b), it need not pay for the 500,000 shares.

Insofar as here pertinent § 78cc(b) provides:

"(b) Every contract made in violation of any provision of this chapter or of any rule or regulation thereunder, and every contract (including any contract for listing a security on an exchange) heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this chapter or any rule or regulation thereunder, shall be void (1) as regards the rights of any person who, in violation of any such provision, rule, or regulation, shall have made or engaged in the performance of any such contract, * * *" (emphasis supplied).

Bankers on its appeal (No. 13190) contends that the District Court erred in not sustaining its affirmative defense both on its motion for summary judgment and on the trial of the cause, and in any event erred in the allowance of interest. Bellanca on its appeal (No. 13191) contends that its recovery should be based on the purchase price stated in the May 8, 1956 agreement ($8.00 per share) or on ...

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